The Natural is one of the greatest baseball books of all time. The Natural was written in 1952 by Bernard Malamud and later adopted into a movie starring Robert Redford. Roy Hobbs is a young man with a gift for throwing fastballs for strikes. Roy Hobbs was nineteen when he was shot in Chicago right before his baseball career was to start. He had to wait sixteen years before he would return to the game. He joined the New York Knights as an outfielder and single handedly saved the Knights from financial ruin with his beloved “Wonder Boy” baseball bat. Roy Hobbs was forced to be patient before he was to become the best there ever was. Mr. Hobbs overnight success was sixteen years in the making.
What does Roy Hobbs have to do with investing? Investing requires patience and focus both of which served Mr. Hobbs well. I believe that Mr. Hobbs would have been an excellent investor. Patience and focus are two traits that all investors should employ. These two traits, more than any other, are the key ingredients for long term investment success.
It would be nice if all stocks rose swiftly and substantially. However, this is just not the case. It may take years for a stock to realize its full potential. As a matter of fact, legendary investor Peter Lynch said in his book, One Up on Wall Street, that he may hold a stock three to five years before the investment realizes a substantial profit. I have often said that a stock only goes down twice – the first time is right after you buy it and the second is when you need the money the most.
Facebook is a classic example of stock that needed some patience. Facebook went public in 2012 and quickly lost a third of its value before it started to rise to dramatic heights. Like!
How about Apple? An investor who purchased $10,000 worth of Apple stock in 1980 and held it to the beginning of 1998 saw their value increase by $8 to $10,008.
What about Big Blue? An investor who purchased IBM stock in 1962 had to wait until 1997 before they doubled their money.
Do you want fries with that order? An investor who bought McDonalds stock in 1972 had to wait until 1982 before the burger chain started to show some real bite. If you added a Coke to your happy meal, you would have had to wait until 1986 before you realized a profit from this great company.
A Boeing investor in 1972 would have had to wait four years before this great company took off.
I know it is hard to be patient in this Twitter, Snap-Chat, Instagram world but it is what’s needed to turn small assets into large assets.
The best time to plant a tree was 20 years ago – Chinese Proverb.
But if we hope for what we do not yet have, we wait for it patiently – Romans 8:25.
Bill Parrott is the President and CEO of Parrott Wealth Management, LLC. www.parrottwealth.com
Source: Morningstar Hypothetical.